Energy Project Financing : Resources and Strategies for Success

A Simple Example to Introduce the Basic Financial Arrangements 87

Table 4-1. Risk Assessment Matrix

Relative Risk Level

Associated with Financing Options

———————————————————

Risk

Option

Major

Mitigating

Factors

#1 #2 #3 #4 #5 #6

Variables

Strategies

——————————————————————————————————————————————————Equipment

3

3

3

3

3

1

Quality of specs

In-house/consultants’ expertise

performance

Selection process

Legal ability available

warranty

Contract conditions

——————————————————————————————————————————————————Technical

4

4

4

3

2

1

Consultant qualifications

Selection process

expertise

Negotiation

——————————————————————————————————————————————————Audit

3

3

3

3

3

2

Auditor ability

Selection process

quality;

Review capability

Review a sample audit

accuracy

Vender bias

3rd party validation

Establish procedural criteria

& scope of audit

——————————————————————————————————————————————————Project 3

3

3

3

3

2

Ability of PM or CM provided Careful planning with DPW and

management

in-house and through

clear definition of roles

inadequate

project delivery option

Service provider selection process

——————————————————————————————————————————————————Construction/

5

4

3

2

2

1

Vendor/subcontractor

Selection process

installation

qualifications

Performance/payment bonds

Contract provisions

Legal ability

——————————————————————————————————————————————————Maintenance

5

5

5

5

3

1

Manpower

Outsourcing

& operations

In-house staff qualifications

Training/experience

Training quality

Selection process

——————————————————————————————————————————————————Savings

5

4

4

4

3

1

Varies by measure

Contractual obligations

persistence

Administrative commitment

Vendor selection

O&M attitudes,

ESCO selection

Training/experience

Guarantees offered

——————————————————————————————————————————————————Legend: N/A not applicable; 1 low risk; 2 low-medium risk; 3 medium risk; 4 medium-high risk; 5 high risk